Sops for small cars, bikes trigger price war

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No sooner had the finance minister P Chidambaram announced reduction in excise duty on small cars from 16% to 12%, a price war seems to have ensued among the manufacturers.

Hyundai Motor India (HMIL) has announced a reduction in the range of Rs 8,730 for Santro to Rs 19,419 for Getz Prime, Maruti Suzuki has reduced prices in the range of Rs 6,500 for Maruti 800 to Rs 18,030 for Swift diesel with immediate effect and General Motors has started working on the financial details.

“With compact cars constituting around 78% of the total car market, the cut in excise duty will help the volumes to go up further,” Arvind Saxena, senior vice president, HMIL said.

Tata Motors also said that it would reduce the prices of its small cars and commercial vehicles.

The budget has given reprieve to the ailing motorcycle industry with the FM announcing a reduction in excise duty on two-wheelers from 16% to 12%. Following this, two-wheeler makers too announced price cuts. Hero Honda has reduced prices from Rs 1,000 to Rs 2,400 across its various models, and Honda Motorcycle and Scooters has announced a reduction of Rs 1,300 to Rs 2,000 with immediate effect. Even Suzuki Motorcycle is mulling to reduce prices as the company feels that a price cut is inevitable.

“The reduction in excise on two-wheelers is a welcome move but it may not be able to stop the deceleration that the industry is facing for more than a year now as availability of finance as well as high interest rate continue to be a major issue,” Atul Gupta, VP (sales and marketing), Suzuki Motorcycle, said.

Chidambaram also announced a cut in excise duty on hybrid vehicles from 24% earlier to 14% now, which would mean a reduction of Rs 40,000 on a car of Rs 4 lakh. This will give a fillip to the plans of auto majors who are mulling to bring their global hybrid vehicles to India.

Harish Sheth, CMD, Setco Automotive, says, “Reduction in excise duty from 16% to 14% will benefit the manufacturing segment and definitely bring down input costs.”